Who is govt shielding in HSBC, Liechtenstein tax-haven lists?

Barack Obama is concerned about it, Angela Merkel is furious about it and Nicholas Sarkozy wants to regulate it. But the leaders of one of the countries most affected by the phenomenon of tax evasion and black money in safe havens – India – don’t want to do much about it.

Tax havens and offshore financial centres are where tax evaders and criminal elements hoard their ill-gotten wealth. In the midst of the Anna movement, one important thing – namely, black money abroad – has been pushed to the background. But this is really the Gangotri of corruption and we are doing little about it. Consider the following two examples:

The Liechtenstein affair: Liechtenstein is a tiny country and a convenient “letter box” for moneyed people all over the world to hide their illegal wealth. Germany’s intelligence agency seems to have paid an unnamed informer more than US$ 6 million for confidential and secret data about the clients of LGT group, a bank owned by the Liechtenstein Prince’s family.

The German government has announced that it will share information on accounts held in the tax haven with any government that asks for it. Finland, Sweden, Norway, UK, France, the US and Australia have expressed interest in the data obtained by Germany.

Now, the interesting and intriguing part is this: the Indian government was initially very reluctant to get that data from Germany. It finally got the data under public pressure in 2009. More than 100 names are presumably in that list. But the results have not been shared with Indian citizens, though some newspapers and TV channels have it.


Headquarters of the Liechtensteinische Landesbank bank Reuters

It is common knowledge that billions of dollars of Indian money is in various tax heavens like Antigua, Switzerland, Bahamas, Liechtenstein, Isle of Man, and St Kitts. But all our leaders – be they in  business, politics, films, sports or bureaucracy – are keen on keeping a conspiratorial silence.

The government is not releasing the names obtained from Germany and claims it is due to the double taxation treaty with that country. The data stolen by Germany from its neighbour is nowhere linked to our treaty since it does not pertain to any misdemeanor by Indians vis-vis Germany. But the government is intransigent. Who is it trying to protect?

Illegal money with HSBC: A few months ago, the Indian government got data on nearly a thousand accounts of Indians allegedly holding illegal wealth with HSBC Bank in Switzerland. This data was obtained by France from people who had stolen the data – more than 15,000 accounts – from HSBC’s data files. The French have given the full data set to us. The government of India is not telling the citizens what action it is taking. It does not want to share the names.

When quizzed about it, the finance minister chants the same mantra about double taxation treaties when those treaties take only prospective effect. What is needed is the political will to bring back the illegal funds accumulated abroad. From Bofors to CWG to 2G to Hasan Ali – all illegal money takes us to tax havens. The size of the illegal stash abroad by Indians is estimated anywhere between half a trillion ($500 billion) and one-and-a-half trillion ($1,500 billion).

Why black money held abroad is dangerous for India: The issue of black money held abroad is of paramount importance for four reasons.

Every two-bit expert on the Indian stock markets knows that our markets are moved by external flows – both inflows and outflows. Such flows may be the ill-gotten wealth of Indians kept abroad in tax havens or domestic funds sent out and brought back to facilitate these activities.

In other words, the destabilisation of our stock markets can be done using the black money in tax havens. The movement of the Sensex may not be related to the performance of our economy but to the actions of these black money holders.

The second concern is: are we adequately sterilised in terms of know your customer (KYC)? This is in the context of the concern expressed by our former National Security Advisor (MK Narayanan) regarding the possibility of terror funds coming through the financial markets.

Third, there is a question-mark about our ability to formulate policies without being blackmailed by foreign governments. For instance, many may not know that De La Rue Giori – the owner of more than 90 percent of the world’s currency printing business  in Switzerland – was one of the passengers in the Indian Airlines plane hijacked to Kandahar. (Time magazine, 17 January 2000). It is easy to imagine the type of pressure that could have been applied by the Swiss on our government at the time of the hijack.

If a large number of our elites hold illegal money in foreign countries like Switzerland, then we will be prone to manipulation in terms of policy formulation. It is not clear what role was played by various foreign agencies in the Kandahar hijack. Even now it is not clear if our foreign minister handed over dollars or Swiss currency to the hijackers. The true history may come out some time in the future.

The same is the case with the Bofors funds. The Swedish authorities knew the names of beneficiaries and accounts since the bribe originated there. The Swiss government also knows the identities, since the money went into Swiss banks. The British government also has some idea, since some money was kept with Barclays by Ottavio Quattrochi and defrozen by our government from London.

The fourth issue is about getting arm-twisted in our economic and foreign policy formulations. It is pertinent to note that if the CIA knows about our leaders holding black money in tax havens, then there is a strong possibility that the ISI can also have that data. This is the danger faced by our republic. Our national policies may not be formulated in Delhi, but in Washington or Islamabad – if they have the data and can use it to pressure our leaders.

To protect and  preserve our republic we need to insist on exposing and bringing back this black money. Is there political will among India’s ruling class to put the issue of tax havens on the global agenda and compel other developed countries to facilitate the closure of these accounts? If not, we are doomed to be indirectly ruled by western spy agencies who have enough information to blackmail our policy-makers.

The tiny island absurdities had their place in the sun in the 20th century. But in the 21st century, integrity is the motto and transparency the mantra. India should pass a law making all the illegal wealth held abroad as part of a new national trust. We should, along with other emerging markets, arm-twist these tiny islands to give back our money.

India should bring sanity to the global financial markets and joy to millions of pauperised persons in Latin America, Asia and Africa. Let us be proactive and not be ruled by outsiders by cleaning up the global financial system.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: